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Thursday, February 7

7th Feb - US Close: ECB Post-Mortem

ECB meeting burned the EURUSD. Friday’s close will set the tone for the next week, so it will be an interesting end to the week – even though calendar looks empty for now. Federal Reserve's Evans gave an interview and I believe his statement on the possibility of ending QE already when unemployment is above 7% was overinterpreted - or it was just an excuse to continue selling the EURUSD. I would not be surprised if we would see a bounce on Friday. Next market-moving event will be the clarification of the Fed's QE-policy.

Päivän sitaatit

EK on mennyt ihan vammaiseksi organisaatioksi. Ongelma mun mielestä on, että siellä on Kone-yhtiöiden johdolla liikaa äänivaltaa. Nehän on kaikki eurohörhöjä ja fantsutusspedejä pahimmasta päästä. Kyllä ne varmaan firmoja osaa jotenkin hoitaa (oho, Nokia), mutta eivät tajua hevon helvettiä maailman menosta. Tai sitten tajuavat, mutta ajavat suppeasti vain työnantajan ja työnantajan omistajan asiaa. Ei siinä mitään, mutta tekevät sen muiden kustannuksella. – Anonyymi

Hesaria ei voi edes verrata Pravdaan. Kansa tiesi miten Pravdaa tulee lukea. Suurin osa sen sijaan lukee Hesaria ikäänkuin se olisi puolueeton tietoaviisi. Ja siihen sen valta perustuukin. – Anonyymi

Previously on MoreLiver’s:

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Roundups & Commentary
Markets – Between The Hedges
The Closer – alphaville / FT

Tomorrow’s Tape: Trade Deficit, AOL Earnings – WSJ
Morning Briefing (Asia): – BNY Mellon
Europe: Closes Red For 2013, Italian Yields At 7-Week Highs – ZH

US: Another "High Volume Dip To Low Volume Rip" Rotation – ZH

No change but an eventful dayFree exchange / The Economist
European central banks were centre stage today as they announced their monetary-policy decisions for February. As expected neither the European Central Bank (ECB) nor the Bank of England (BOE) made any change to interest rates, which in both cases are at historic lows. But there were other important developments today.

BOE to Reinvest Maturing Gilts as Stimulus Policy SustainedBB
The Bank of England will reinvest the first gilts to mature since it started its asset-purchase program four years ago as it sustains stimulus for an economy in a “slow” recovery.

The EU budget - gifting the way to a dealeuobserver
This EU summit may see a deal on the bloc's next budget. If so, an unofficial 'gift' list will have played a small but significant role.

EURUSD looks interesting.
Intro statement to the press conference (with Q&A) ECB
Video of Intro statement (with Q&A) ECB

Draghi Signals Euro Strength May Hurt ECB’s Recovery Efforts BB
Draghi signaled policy makers are concerned that the euro’s strength will hamper their efforts to pull the economy out of recession.

Euro Falls Most Since July as Draghi Warns of Slowing InflationBB
The euro fell the most since July against the dollar after Draghi said the recent strength of the currency creates a concern that inflation will slow.

ECB meeting could mean highs are in for EURUSDTradingFloor
John J. Hardy: The highs may be in for EURUSD after this ECB meeting, even though Mr. Draghi left much unsaid. Firmer conviction for a call that the highs are in would come with a close below 1.3300.

ECB policy meeting: dovish Draghi in difficult balancing actTradingFloor
Steen Jakobsen: Draghi was rather more dovish than most market participants had expected, in his comments following the bank’s monetary policy meeting on Thursday which left interest rates unchanged.

ECB afterthoughts: verbal interventionTradingFloor
Juhani Huopainen: Draghi was honest about the state of the economy and in doing so expectations of a rate cut later reemerged. By verbal intervention alone, he was able to move the EURUSD by 200 pips - though QE comments by the Fed's Evans also helped a lot.

ECB gives blessing to 'historic' debt deal for Irelandeuobserver
Dublin has secured the tacit blessing of the ECB on a deal extending the debt repayment on its bailed-out banks, allowing it to return to markets this year.

Draghi Strikes Again: Talk, but No ChangeMarc to Market
However, we continue to believe this decline is corrective in nature and anticipate the resumption of the uptrend.  This is the kind of pullback--more than 2% from the high, that offers opportunities for short and medium term participants. 

Mr Draghi and the EURBNY Mellon
Given the comments made in recent days by President Hollande on the issue of exchange rates it was always likely that the issue of a strong exchange rate was going to be raised at today’s press conference.

This is what a currency war looks likeWonkblog / WP
While no interest rate cuts or other steps to ease monetary policy seem on the horizon from the ECB, merely by acknowledging that a rising euro could dampen growth prospects, markets were assuming that this means Draghi will be open to those steps in the future if the euro rise continues.

ECB masters verbal interventionDanske Bank (pdf)

EUR Slumps Most Since JulyZH

Ireland’s Kenny Declares Victory as Bank Debt Accord ReachedBB
Irish Prime Minister Enda Kenny declared victory in his fight to ease the burden of the nation’s rescue of the financial system, boosting his bid to regain the country’s sovereignty.

Noting the detailalphaville / FT
Here’s the transaction doc from the Irish ministry of finance

They took note.alphaville / FT
Preisdent ECB Mario Draghi on Thursday all but confirmed a “deal” for Ireland to replace the promissory notes that once backed Anglo Irish with a sovereign bond — indicating that there was no deal per se. The ECB’s general council unanimously took note of something which the Irish government and Irish central bank have agreed between themselves.

Prom note payments “gone”alphaville / FT
Under the agreement reached today with the ECB, the Promissory Notes are being exchanged for long term Irish Government bonds with maturities of up to 40 years. The first principal payment will not now be made until 2038 and the last payment will be made in 2053. The average maturity of the Government bonds will be over 34 years as opposed to the 7 to 8 year average maturity on the Promissory Notes. In effect, we have replaced a short-term, high interest rate overdraft that had to be paid down quickly through more expensive borrowings, with long-term, cheap, interest-only loans.

Why it matters that the Irish promissory notes are gonealphaville / FT
And why this could well have been the best possible deal for Ireland.

Ireland takes major steps toward recoverySober Look
Troika Statement on the review mission to IrelandECB

Fed seen pressing on with stimulus, mindful of risksCNBC
Chicago Fed's Evans sees continued bond buying, says bond buying could ease before jobbless hits 7%. Fed Governor Stein cites risk from extended low rates

The Fed, Credit Bubbles and ExitCFR
Jeremy Stein’s speech  today–“Overheating in Credit Markets:  Origins, Measurement, and Policy Responses”–provides valuable insight on the issue of credit bubbles that could result as a consequence of current Federal Reserve policy.  As such, it speaks to the upcoming debate over the Fed’s exit strategy.  

"In Feb 2013, Fed Will Buy 75% Of New 30y Treasury Supply"ZH
straight from this quarter's Treasury Borrowing Advisory Committee (i.e., Primary Dealers) presentation to the Treasury Department

Who Will Be The Next Head Of The Bank Of Japan?ZH
In a surprise announcement, BoJ Governor Shirakawa announced that he will step down on 3/19 (a month ahead of schedule)…Abe's push for a new governor, however, is meeting resistance from his own cabinet and financial bureaucrats, who fear extreme measures from the central bank may trigger a damaging rise in bond yields.

Stress IndicatorsTradingFloor
Stress Light - Is tail-risk coming back?

Let’s wait for a fall in stocks before declaring a great rotationalphaville / FT
The Citi global equities team has taken a longer-term view and is pretty skeptical that the recent flows signal anything like a ‘great rotation’

Suursijoittaja Soros: EU on kuin Neuvostoliitto – loppujen lopuksi koittaa tuhoTE

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